How to Read Your Homeowners Insurance Policy
Homeowners insurance policies are meant to provide you with security and peace of mind in the event an unimaginable disaster strikes and destroy your property. However, it turns out most homeowners might actually be too secure about the insurance protecting their residence.
According to a national consumer survey conducted by International Communications Research for Trusted Choice and the Independent Insurance Agents & Brokers of America, more than half of the respondents didn’t understand major parts of their homeowner’s policies. They are follow up survey also revealed that almost 75% of the respondents admitted to not having a separate flood insurance policy, and over 40% didn’t know if their insurance covered the replacement of lost belongings due to a disaster.
This article gives you a brief overview of the parts of a typical homeowners insurance policy, so you can better understand the risks that are actually covered in your own policy.
An Overview of a Homeowner’s Policy
Declarations. Most of the unique information in your policy is contained on the declaration’s page. Because this page contains personal identification information, your insurance company is supposed to keep it confidential. Conversely, anything following the declarations page is pieced together from standardized policy forms using provisions identical to other policies.
The declarations page contains the following information:
- Your name;
- Your policy number;
- The name of the underwriter;
- A description of the insured property;
- Contact information, including your mailing address (if different from that of the insured property), phone number, and/or e-mail address;
- The effective and termination dates for the policy period;
- The policy premium amount;
- The applicable coverages and the insurer’s corresponding limits of liability; and
- The amount of any applicable deductible.
The homeowner who purchased the policy will most likely be identified as the “named insured” with their home address listed as the “insured location.” Lastly, your declarations page may also contain a brief summary of the endorsements that apply to your policy.
Insuring Agreement. Interestingly enough, this is the shortest section of your policy. This section expresses your agreement to pay premiums to your insurance provider in exchange for their promise to compensate you for losses covered by the policy.
Definitions. The definitions listed on this page apply throughout the policy. Whenever a policy provision uses a defined term, it will typically appear either bolded, italicized, capitalized, or within quotation marks. Some definitions reference other defined terms. While this might seem overly extensive, your insurance company does this to minimize ambiguity. This is because contractual ambiguities are construed against the insurance company in favor of the policyholder.
Section I – Property Coverage. Under this section, your insurance company agrees to compensate you for certain losses (including damage) to your home and personal property.
Although the exact contents of this section may vary from policy to policy, all homeowners policies cover damage or loss to your “dwelling” and its adjacent structures (e.g. a garage). Lost or destroyed personal property may also be covered. It is important to remember that the “endorsements” at the end of your policy may modify the scope of this coverage.
Section I – Property Coverage Exclusions. Your policy explicitly lists the circumstances that are specifically excluded from coverage. Therefore, your insurance company will not compensate you for any loss or damage that arises from an exclusion listed here.
You can expect your policy to exclude payment for loss or damage that results from, or relates to:
- Government regulations or laws;
- Power failure;
- War or nuclear hazard;
- Your intentional acts;
- Weather conditions;
- Defective design, etc.
Again, an endorsement at the end your policy may apply to alter the scope of these exclusions.
Section II – Liability Coverage. Under this section, your insurance company agrees to cover any damages for which you are liable to pay a third-party due to any accidental bodily injury or property damage you caused. Your insurance company also agrees to provide you with a free lawyer to defend you against a third-party lawsuit involving accidental bodily injury or property damage.
Section II – Liability Coverage Exclusions. Like Section I’s exclusions, this section lists the circumstances for which your insurance specifically does not pay.
A typical homeowners policy excludes coverage for third-party bodily injury or property damage claims that arise from, or otherwise involve:
- A resident of your household;
- Injuries to someone insured by your policy;
- Damage to property owned by you or another insured;
- Your rental activity, except in certain situations;
- Your business pursuits;
- Your professional or business services;
- A contract in which you agreed to assume liability for someone else; or
- Your intentional acts.
Conditions. This section contains general provisions about your contract with the insurance company. Some policies include a list of what you should do after an accident or loss in order to make a claim in this section.
Endorsements. These are provisions that are added to your policy and function like amendments. They can either modify or delete existing provisions, or add entirely new provisions. They can apply to any section described above.
Consult a Qualified Florida Insurance Claims Lawyer
Insurance policies can be confusing and overwhelming, often involving complicated provisions that rely on terminology with equally complicated definitions. That’s why you should consult an experienced Florida insurance claims attorney if you are confronted with an insurance matter. At the Morgan Law Group, P.A., we have over 4 decades of experience representing policyholders against their insurance carriers, fighting to make sure our clients get the recovery they deserve.